Golden State Warriors must pay off $40 million Oracle Arena debt

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After a watch party for Game 4 of the NBA Finals, Golden State Warriors fans watch fireworks at Oracle Arena in Oakland, Calif., on Friday, June 8, 2018. The Warriors swept the series to win their second consecutive NBA championship. (Doug Duran/Bay Area News Group)

OAKLAND — The Golden State Warriors can’t leave for the City without paying the Town, an arbitrator ruled Monday.

When the team crosses the bay next season for its gleaming, new $1 billion arena in San Francisco, it will still be on the hook for about $40 million to retire the debt for renovation costs at its current home, Oracle Arena.

Arbitrator Rebecca Westerfield’s ruling settled an argument between the Warriors and the city of Oakland and Alameda County, which own the arena, over language in a 1996 contract.

“This was an after-the-fact attempt by the Warriors to rewrite the parties’ deal, and it would have left the people of Oakland and Alameda County holding the bag,” said Daniel Purcell, a partner Keker, Van Nest & Peters, which represented the city and county. “We are grateful that the arbitrator saw it our way.”

In a statement, the Warriors said the team disagreed with Westerfield’s interpretation of the license agreement with the Coliseum authority.

“Of course we are reviewing our options at this time, but as we’ve always said, we will fulfill any debt obligations that we owe,” the team said.

The decision was a major victory for the city and county, which are still saddled with nearly $80 million in renovation costs at the Coliseum for the Raiders, for which the NFL team is not obligated to pay, even when they leave for Las Vegas.

The dispute stemmed from different interpretations of the team’s 20-year lease agreement at Oracle Arena signed in 1996, under former team owner Chris Cohan. The Warriors argued the team has no obligation to pay remaining debt for renovations to the arena once it departs for San Francisco next year, while Coliseum authority officials insisted the team must cover the costs in full.

The disagreement came down to opposing interpretations of the word “terminates.” Team representatives argued “terminate” meant ending the contract before it expired in 2016, but the team extended it through this season.

Coliseum authority attorneys took “terminate” to mean any end to the team playing at Oracle. Westerfield sided with the authority.

“It was yet another example of a very rich party trying to offload its debts on the public,” Purcell said.

As part of the contract, the Warriors have paid $7.5 million a year toward the debt, which is now around $55 million but is expected to be about $40 million when the team leaves. The $150 million of renovations were to be paid over 30 years.

“The Warriors committed to pay this debt. This money was spent to make specific renovations to meet the Warriors’ needs,” McKibben said. “We simply wanted them to honor the agreement, regardless of where they will be playing their home games in the future.”

“We are pleased by today’s ruling and believe that it’s the Warriors, not the Oakland and Alameda County taxpayers who should repay this debt,” said Coliseum Authority Chair and Alameda County Supervisor Nate Miley.

Oakland City Council President Larry Reid, who also sits on the authority board, said while the community appreciates the Warriors, the taxpayers “should not be on the hook.”

Oracle will not have a long-term tenant come the 2019-20 NBA season. There are no plans to tear it down and it will continue to host concerts and other events. The Warriors can make payments until 2027 to extinguish the debt currently at $55 million.

The team broke ground in 2017 on the Chase Center in San Francisco’s Mission Bay neighborhood, which is set to open in 2019. Joe Lacob and his ownership group is financing the arena.

David DeBolt is a reporter for the Bay Area News Group who covers Oakland. DeBolt grew up in the Bay Area and has worked for daily newspapers in Palo Alto, Fairfield and Walnut Creek. He joined the organization in 2012.